What difficult issues may arise in connection with a notification?
Insurance notifications can create various problems, including:
- lack of information – it can be difficult to obtain reliable information in the early stages of an incident. It is usual to make an initial high-level notification to the insurer, with more detailed information being provided once it is available
- duty of confidentiality – when an incident occurs, your organisation may be bound by strict rules of confidentiality. For example, in some criminal and/or competition investigations by the OFT or European Commission, there may be a strict legal obligation to keep the investigation (and the organisation’s status in it) confidential. This can create a conflict between an organisation’s duty to notify its insurers and its confidentiality obligations. In competition investigations, applicants for leniency are generally required to keep their status as an applicant confidential from all third parties. You should seek specialist legal advice in deciding how best to resolve such conflicts
- making admissions – insured parties must usually obtain the insurer’s consent before making admissions or entering into settlements in connection with anything covered by the policy. This can cause difficulties when companies have reporting obligations to government agencies, or where decisions about making an admission or settlement must be made quickly
- disclosing privileged material – insurers may ask the insured parties to supply legally privileged material (eg legal advice on liability issues arising in an incident). Where any such material is supplied, it is essential that its confidentiality should be preserved, along with its privileged status against third parties other than the insurer (see sample limited waiver wording)
The ways in which these, and other difficulties, should be resolved will vary depending on the facts of a particular incident and the terms of the relevant insurance policies. Discuss the most appropriate course of action with your legal advisers.